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Standard Chartered's new boss halves dividend to shareholders Standard Chartered's new boss halves dividend to shareholders
(about 4 hours later)
The new boss of Standard Chartered has halved its dividend and attempted to quash speculation that the emerging markets-focused bank is to move its headquarters out of London. The new boss of Standard Chartered has halved the dividend and attempted to quash speculation that the emerging markets-focused bank is to move its headquarters out of London.
Bill Winters, making his first presentation since he replaced Peter Sands in June, also left the door open to tapping investors for cash to bolster the bank’s financial strength. A full strategic review will be presented later in the year as the investment banker aims to cut costs and bolster returns to shareholders. Bill Winters, making his first presentation since he replaced Peter Sands in June, also left the door open to tapping investors for cash to bolster the bank’s financial strength. A full strategic review will be presented later in the year as the investment banker tries to cut costs and bolster returns to shareholders.
“The results in the first half of 2015 underline the fact that we need to kickstart performance, reduce costs, slash bureaucracy, improve accountability and speed up our decision making,” said Winters. He gave no targets for job cuts, but 4,000 roles – 5% of the workforce – have already gone in the last six months.“The results in the first half of 2015 underline the fact that we need to kickstart performance, reduce costs, slash bureaucracy, improve accountability and speed up our decision making,” said Winters. He gave no targets for job cuts, but 4,000 roles – 5% of the workforce – have already gone in the last six months.
First-half profits fell 44% to $1.8bn (£1.15bn) as a rapid rise in bad debts in India and a fraudulent loan of $90m in its private bank dented results. The dividend is being cut by 50% in the first half to 14.4 cents a share – and it will be halved again for the year end. First-half profits fell 44% to $1.8bn (£1.15bn) as a rapid rise in bad debts in India and a $90m provision for a fraudulent loan in its private bank dented results. The dividend is being cut by 50% in the first half to 14.4 cents a share – and it will be halved again for the year end in a move that is likely to save $1bn.
Winters used the results to list the challenges he inherited from Sands, who had been one of the few bank bosses to survive the banking crisis before his exit was announced in February. “We are working through a legacy focus on growth over risk discipline and returns together with an on-going emerging markets slow down. We have also been too slow to take hard decisions, whether on costs, people or strategy,” Winters said.
Related: Standard Chartered could compensate new boss with £6.5m in sharesRelated: Standard Chartered could compensate new boss with £6.5m in shares
Winters said Standard Chartered was very happy after changes in the budget to water down the bank levy – which will cost it $500m this year – and that a review of its head London office was not a top priority. “It took one of the issues off the table,” he said. The changes in the government’s July budget to water down the bank levy – which will cost it $500m this year – seem likely to have made a review of its head office in London less of a priority. “It took one of the issues off the table,” he said.
Winters was hired to replace Sands after three profit warnings by the bank, which until 2013 had an unbroken record of rising profits despite the banking crisis. He joined from hedge fund Renshaw Bay but had a lengthy career at US bank JP Morgan until the 2008 banking crisis. Winters was hired to replace Sands after three profit warnings from hedge fund Renshaw Bay but he had a lengthy career at US bank JP Morgan until the 2008 banking crisis.
The prospect of a cash call on investors after this year’s Bank of England stress tests is weighing on the market, although the shares rose 2% to 970p after the dividend cut was regarded as a way to preserve resources.
“No decisions have yet been taken on whether or not we will seek additional capital … If we decide we need capital for the long-term benefit of the group, we will raise capital. If we decide we don’t need it, we won’t,” Winters said.“No decisions have yet been taken on whether or not we will seek additional capital … If we decide we need capital for the long-term benefit of the group, we will raise capital. If we decide we don’t need it, we won’t,” Winters said.
Standard Chartered is facing scrutiny from US regulators over its anti-money laundering controls after a £400m fine in 2012 for breaching American sanctions against Iran. In December, the bank said a two-year deferred prosecution agreement (DPA) that was imposed at the time was being extended for three years. The bank warned this could lead to new penalties as an investigation into possible historical violations of US sanctions was being conducted. He is taking the helm while the bank is facing scrutiny from US regulators following a £400m fine in 2012 for breaching American sanctions against Iran. Its two-year deferred prosecution agreement (DPA) has already been extended for three years and it warned this could lead to new penalties as an investigation into possible historical violations of US sanctions is underway. It has also been drawn into regulatory investigations into foreign exchange rigging.
Winters said the bank was making changes to reduce risks imposed by new customers – which he described as “tightened client on-boarding procedures”. He added that it was also making efforts to reduce risks, such as by pulling back from small businesses in United Arab Emirates. Regulatory costs rose 60% to $453m in the first half of 2015. Winters said changes were being made to reduce risks imposed by new customers and to pull back from small businesses in United Arab Emirates. Regulatory costs rose 60% to $453m in the first half.
In terms of lending, Winters said weak operational risks had also left the bank open to fraud. “We grew aggressively in certain markets, we accepted high concentrations by industry, by geography and by individual borrower,” he said. Lending rates also “lacked disciplined”, he added. Winters said weak operational risks had left the bank open to fraud, and lending rates “lacked disciplined”.
Winters sat on the independent commission on banking, chaired by Sir John Vickers, which recommended banks erect a ring fence between their high street and investment banking arms as well as holding more capital. Winters said the ring fencing rules – which some banks have been fighting to have watered down – are “entirely appropriate”. “We grew aggressively in certain markets, we accepted high concentrations by industry, by geography and by individual borrower,” he said.
But, he said: “The banking regulation has moved on substantially from 2011. When I look back at what has happened … requirements for increased capital have far exceeded what we set out in 2011.” He announced he had hired HSBC veteran Mark Smith as chief risk officer, the latest in a series of changes at the top. “We don’t think anyone – especially the regulators – would want Winters to be driving the Standard Chartered bus in any other direction. And we’d expect that anyone within Standard Chartered who didn’t like it could disembark – thus helping to reduce costs,” said Sandy Chen, analyst at brokers Cenkos.
Winters sat on the independent commission on banking, chaired by Sir John Vickers, which recommended banks ringfence their high street operations from their investment banking arms, as well as holding more capital. Winters said the ringfencing rules – which some banks have been fighting to have watered down – are “entirely appropriate”.
But, he said: “Banking regulation has moved on substantially from 2011. When I look back at what has happened … requirements for increased capital have far exceeded what we set out in 2011.”